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Too Much IP Protection is Bad for Innovation

There were some good (all reactions are good!) reactions to the blog post on the problems of using patent counts to measure innovation so I thought I would follow up with some evidence on patents and intellectual property (IP) strategy.

Conventional thinking is that any IP generated within an organization should be carefully guarded by secrecy agreements, trademarks, patents or a combination of these things. As many universities become more commercially focused, researchers and students are now encouraged to safeguard their IP as well. In fact, I taught a Masters course in technology management last year where several grad students could not discuss their projects in class because they has signed confidentiality agreements.

Many years ago when I was doing biochemistry research my laboratory director took on a project in the aquaculture industry. After early results the director thought that he had made a breakthrough in aquaculture nutrition and consulted the commercialization office of the university. Secrecy agreements were signed by him and the research assistant, who was instructed not to talk to anyone in the laboratory about the project.

One day the research assistant asked me for some technical advice on processing samples and I was more than happy to give it, but what followed next was a very nasty surprise. Within an hour I had the director screaming at me and accusing me of industrial espionage. The closest thing I can compare it to is the scene from the Lord of the Rings where an aging Bilbo sees Frodo wearing his old ring and turns into Gollum with his desperate obsession over “my precious”.

So much for academics and IP protection but what happens to businesses when they get obsessed by IP?

The best study of the relationship between IP protection and innovation is by Keld Laursen (Copenhagen Business School) and Ammon Salter (Imperial College London). They are world class researchers and if you disagree with their results then its worth reading the original paper.

Using a dataset of 2700 UK manufacturing firms, Laursen and Salter looked at the relationship between different IP protection strategies and innovation outcomes. While they looked at formal protection such as patents, trademarks and designs, they also looked at informal protection tactics such as secrecy agreements, complexity of design and lead times over competitors. What they found, for both types of IP protection was that moderate rates of IP protection correlated with increased innovation but intensive IP protection resulted in poor innovation performance. They explain this result as follows….

There are several possible interpretations of this finding. We suggested that firms
might develop a myopia of protectiveness, being overly protective of their new
innovations. They focus their managerial resources and attention towards the
acquisition of legal protection to the detriment of other activities, such as the
mobilization of complementary assets. They may become obsessed with secrecy,
limiting their opportunities to work with others, such as lead users, or to trade
knowledge informally with suppliers, customers and competitors. In this respect,
firms may suffer from a “Gollum effect”, locking themselves away from the rest of
society in the vain pursuit of full protection.

Next time someone tells you that you should be protecting all of your IP, ask yourself why they are telling you this. IP is a means to an end and not an end in itself.

Disclosure of Material Connection: Some of the links in the post above are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

10 thoughts on “Too Much IP Protection is Bad for Innovation”

You hit the nail right on the head. In an upcoming post, I concluded that “If your business requires you to do the patent thing, by all means go ahead and do that. Then hand it over to the lawyers and get quickly back to work on the next innovation that 1) will delight your customers and 2) catch your competition unawares.”

I think we would do wonders for our economy if we put a 10-year moratorium on Software Patents. If we still need them after 10 years, we can bring them back (but I doubt that we would).

Thanks for the reference to the Laursen and Salter study. I’m sure I’ll find use for it.

Too few companies realize that a strategic (vs. confining) approach to IP can serve as ‘honey to bees’ to attract innovation partners (customers, suppliers, other researchers etc.) – if you have a more open IP strategy, then those with valuable IP will be more attracted to come to you than to others (and yes, you may get approached with junk but…). The higher your IP walls, the more likely those looking for innovative approaches and sharing will have their IP bounce off your walls into a competitors hand.

This is why I’ve become increasingly interested in Creative Commons licensing (http://creativecommons.org/) for sharing and encouraging the mashup of creative ideas while preserving attribution throughout the ongoing innovation pathway. Not sure if it’s been thoroughly tested out in court, but why not, for some particularly generative innovations, open the gate for broad-scale exploration.
I’ve been applying share-alike licensing to most of my written and graphic (mostly facilitation-related) products, which permits use, modification, distribution with attribution, even for commercial purposes–with subsequent products expected to bear the same “share-alike” licensing. I haven’t done the research yet, but would be interesting to see which companies and kinds of companies are exploring this approach.

Actually, I’ll respond briefly to Ken too – I agree with you about the potential value of Creative Commons licensing. We’ve licensed the blog under CC, and yesterday John & were talking about creating a flickr stream which also be CC licensed. It’s an excellent initiative.

I’m not sure if the license has been directly tested in court, but it certainly had an impressive amount of legal firepower involved in putting it together in the first place, so I’m reasonably confident in CC licenses.